Bitcoin’s rise could be due to price manipulation

A new study suggests the dramatic rise of cryptocurrency prices during 2017, which included bitcoin, ethereum, and altcoins, may have been the result of price manipulation.

The increase in value of many cryptocurrency prices was not achieved by staightforward means, according to research conducted at the University of Texas at Austin. The research was carried out by experts in financial markets fraud and the research suggests several distinct patterns in trading which indicate that at least one person involved with the major cryptocurrency exchange Bitfinex undertook actions which led to inflated virtual coin prices. Bitfinex is a cryptocurrency trading platform, owned and operated by iFinex Inc., and it is the largest Bitcoin exchange platform.

The research is in the form of a white paper titled "Is Bitcoin Really Un-Tethered?", and it is written by Professors John M. Griffin and Amin Shams, both from the University of Texas at Austin - Department of Finance. The research was conducted using algorithms which were used to analyze the blockchain data, shifting through millions of transactions listed on public ledgers. This analysis revealed that purchases made with Tether were timed following market downturns. This led to a sizable increase with Bitcoin prices.

According to the researchers, the big data analysis shows flow clusters below round prices which induce asymmetric autocorrelations in Bitcoin, leading the researchers to conclude that such "patterns cannot be explained by investor demand proxies but are most consistent with the supply-based hypothesis where Tether is used to provide price support and manipulate cryptocurrency prices."

This tallies with suspicions from U.S. authorities, according to The Verge. In December 2017, the U.S. Commodity Futures Trading Commission subpoenaed Bitfinex and the company Tether. This arose after investors expressed concerns over similar price manipulation issues. The U.S. Department of Justice has opened up an investigation into bitcoin and price manipulation.